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Reckitt may top Novartis, Sanofi in $12B race for Merck consumer unit

With a final bid deadline looming, Merck & Co.'s consumer health unit still has several big-name pharma suitors. But Reckitt Benckiser, the British consumer specialist, may end up snatching the prize, Bloomberg reports.

Merck ($MRK) is entertaining bids for the consumer business as part of an effort to streamline operations and focus on its best-performing units. Big Pharma rivals Novartis ($NVS), Bayer and Sanofi ($SNY) are all still in the hunt, Bloomberg sources say. Novartis, which is in the midst of a strategic review of its own, would like to build up in consumer health as it considers unloading or otherwise revamping smaller, less promising units. Bayer and Sanofi each have pegged consumer health as an avenue for growth.

But Reckitt Benckiser may be able to win the day, Bloomberg says. The smaller company would have fewer antitrust problems to worry about, for one thing. Sanofi already markets Allegra, its once prescription-only allergy remedy that it now sells over-the-counter as well. One of Merck's top OTC products is Claritin, a rival allergy treatment.

But more importantly, Reckitt could squeeze more costs out of a combined operation than its rival bidders might achieve, the news service says. That means Reckitt could file a larger bid. Analysts have said the unit could bring up to $12 billion for Merck.

Snapping up the Merck unit would vault Reckitt into third place in consumer health, up from ninth. And it would be the latest in a series of deals for the company, which bought J&J's ($JNJ) K-Y brand of sexual products last month, complementing its own Durex condom business. Last year, Reckitt trumped Bayer's bid for Schiff Nutrition to nab the company for $1.4 billion. And the company last March bought Latin American rights to an assortment of Bristol-Myers Squibb ($BMY) over-the-counter products for $482 million, a price analysts called "eye-watering."

Ironically enough, as Merck and Novartis consider hiving off nonpharma businesses, Reckitt is weighing a spinoff of its pharma unit. Final offers for Merck's consumer health unit are due next Wednesday, Bloomberg's sources say.